Ukraine unrest: Protesters storm regional offices

Anti-government
demonstrators in Ukraine are expanding their protests after talks
between the opposition and President Viktor Yanukovych stalled.

In western Ukraine, activists seized the regional government
office in the city of Ivano-Frankivsk and are storming another one in
Chernivtsi.

Protests were reported in Lutsk, in the north-west, and Sumy, in the east.

Meanwhile, Mr Yanukovych vowed to use "all legal means" if a solution to the crisis is not found.

At a meeting with religious leaders, he also promised to
amend anti-protests laws rushed through parliament last week and
reshuffle the government at an urgent session of parliament due to begin
on Tuesday.

And he said amnesty would be granted to those detained activists who had not committed "grave crimes".

In the capital, Kiev, new barricades were erected as the main protest camp expanded.

Analysis

The Lviv regional state administration office resembles
something from protest-hit Kiev. All around the building there are
barricades of snow bags, tyres and wooden sticks.

On Thursday, hundreds of anti-government protesters seized control here.

Inside, I met "commandant" Andriy, the man in charge here now
and the head of the local trade union. Andriy told me that the
protesters were motivated by anger at what was happening in Kiev.

They blame the authorities for the violence and for death of
anti-government activist Yuri Verbytsky, who was from Lviv. He was found
dead in a forest outside Kiev. "People," Andriy said, "have the right
to rise up."

It's a similar picture in other parts of western Ukraine,
where protesters have been picketing local government offices and, in
some cases, taking control.

It's in this region that opposition to President Yanukovych
has traditionally been strongest - and pro-Europe sentiment most keenly
felt.

Protesters said they had moved into the building to get out of the cold and to rest

On Independence Square, snow covers the protesters' tents

The protesters are now demanding that the local governor should resign immediately.

In Chernivsti, crowds stormed the governor's office as police
tried to protect the building. People shouted "Shame on you!" and
"Resign!"

In Lutsk, a big demonstration is being held outside the local administration. Unrest was also seen in Sumy.

Regional offices are being blockaded in the western city of Uzhgorod.

Meanwhile in Lviv, protesters have built barricades around
the governor's office that they seized on Thursday. There were also
reports that some members of the special police, Berkut, were resigning.

In Kiev, masked activists stood guard around the newly-build
defence barriers. Some activists were seen carrying riot shields
captured from the police as trophies.

The barricades took shape on Hryshevskyy Street and also closer to the presidential administration building.

One group of protesters took control of the main agricultural ministry building, reportedly meeting no resistance.
"We need to keep people warm in the frost," protester Andriy
Moiseenko was quoted as saying by the Associated Press, as temperatures
dipped towards minus 16C.
Ministry workers were allowed to take their possessions but not permitted to go to work.
Former boxer Vitaly Klitschko, one of three opposition
leaders who met Mr Yanukovych, came back on Thursday evening saying the
president had made no real concessions.
"Hours of conversation were spent about nothing," he said.
People on the Maidan later voted to stop any talks with the
president, and the decision was taken to expand the main protest camp.
The opposition had been calling for harsh new anti-protest
laws to be repealed, a snap presidential election and the resignation of
the government.

Appeal for restraint

Justice Minister Olena Lukash said on Thursday that further talks would take place, without saying when.

There
are two Latin Americas right now. The first is a bloc of
countries—including Brazil, Argentina and Venezuela—that faces the
Atlantic Ocean, mistrusts globalization and gives the state a large role
in the economy. The second—made up of countries that face the Pacific
such as Mexico, Peru, Chile and Colombia—embraces free trade and free
markets.

Because both sets of countries
share similar geography, culture and history, this divide makes the
continent today something of a controlled experiment in economics. For
almost a decade, the economies of the Atlantic countries have grown more
quickly, largely thanks to rising global commodity prices. But the
years ahead look far better for the Pacific countries. The region as a
whole thus faces a decision about (as it were) which way to face: to the
Atlantic or the Pacific?

There is good
reason to think the Pacific-facing countries have the edge. Much of the
continent is "paying the costs of exaggerated protectionism
and…irresponsible policy," said
Alan Garcia,
Peru's former president, at a recent conference in Mexico City.
"That is not the Latin America that I see in the future. I see the
future in countries like Chile—which has been a good example of how to
do things for a while—Colombia, Peru and Mexico."

In
2014, the Pacific Alliance trade bloc (consisting of Mexico, Colombia,
Peru and Chile) is slated to grow an average of 4.25%, boosted by high
levels of foreign investment and low inflation, according to estimates
from
Morgan Stanley.
MS +0.13%.
But the Atlantic group of Venezuela, Brazil and Argentina—all
linked in the Mercosur customs union—is projected to grow just 2.5%,
with the region's heavyweight, Brazil, slated to grow a meager 1.9%.

The
diverging trend lines between the two Latin Americas may last long past
2014. When China's economic growth was at its peak, the rising giant
snapped up Venezuelan oil, Argentine soy, Chilean copper and Brazilian
iron ore. But as China's economy has slowed, commodity prices have
followed suit, hitting the Atlantic economies hardest. Brazilian Finance
Minister
Guido Mantega
used to boast that his country's model of economic development
would soon spread throughout the world. But Brazil—with its high taxes,
red tape and tariffs—did little to prepare for the day when commodity
prices might weaken.

Economists say
that countries in the free-trading side of Latin America are better
poised to prosper, with higher productivity gains and open economies
more likely to attract investment. The Pacific countries, even those
like Chile that still rely on commodities such as copper, have also done
more to strengthen exports of all kinds. In Mexico, manufactured
exports now account for nearly a quarter of annual economic output. (The
figure for Brazil: a paltry 4%.) The Pacific economies are more stable
too. Countries such as Mexico and Chile enjoy low inflation and bulging
foreign reserves.

By contrast,
Venezuela and Argentina are starting to resemble economic basket cases,
with high inflation and weak government finances. In Venezuela,
inflation is running above 50%—on par with war-ravaged Syria. President
Nicolás Maduro,
the successor to the late populist Hugo Chávez, is doubling down
on price controls to try to tame inflation. The fairly predictable
result: widespread shortages of everything from new cars to toilet
paper. A popular new app uses crowdsourcing to tell residents of
Venezuela's capital where lucky shoppers have found, say, meat—allowing
others to rush to the store and snap up the precious stuff.

This
Latin America's finances are unimpressive too. Among the three worst
performing currencies in the region in 2013 were those of Venezuela,
Argentina and Brazil. Argentina's peso, for instance, fell 32% against
the dollar at official rates—and some 47% on the black market.

Argentina
has also suffered from heavy-handed regulation. In Buenos Aires, the
southern hemisphere's summer months have brought soaring
temperatures—and regular blackouts. The government slapped price
controls on energy prices back in 2002, hoping to help the poor overcome
the 2001 financial collapse. But what was supposed to be a temporary
measure became permanent. Electricity companies scared off by the price
controls stopped investing in the city's aging electricity grid.

Even
Brazil, which has had far more responsible economic management than
Venezuela or Argentina, is starting to struggle with rising prices and a
boom in credit that is starting to turn. Last year, one Brazilian
summed up the Atlantic bloc harshly: "Brazil is becoming Argentina,
Argentina is becoming Venezuela, and Venezuela is becoming Zimbabwe."

A
key moment in creating the two Latin Americas came in 2005, when
Brazil, Argentina and Venezuela (then led by Mr. Chávez) lined up to
kill the proposed Free Trade Area of the Americas—a free-trade zone
stretching from Alaska to Patagonia and promoted by President
George W. Bush.
Troubled by the FTAA's demise, the Pacific Alliance set out to
create its own free-trade area, eliminating tariffs on 90% of goods and
setting a timetable to eliminate the rest.

The
diplomacy practiced by this half of Latin America differs too: While
the Atlantic bloc often views the U.S. with suspicion or outright
hostility, the Pacific countries tend to have closer ties to Washington.
"We set out to create the Pacific Alliance because we wanted to set
ourselves apart from the populists," said
Pedro Pablo Kuczynski,
a former Peruvian finance minister. "We wanted a thinking man's
axis."

Many of the region's young, the
bulk of the population, have cast ballots for politicians such as Mr.
Chavez, who offered painless growth by printing money. These youthful
voters may have painful lessons ahead of them.

"In
the end, the results from the different blocs will resolve the
debates," Mr. Kuczynski said, "but bad ideas take a long time to die."

martes, 7 de enero de 2014

The 20th
anniversary of NAFTA's implementation on Jan. 1 has revived some of the
perennial arguments that have surrounded the bloc since its inception.
The general consensus has been that the trade deal was a mixed bag, a
generally positive yet disappointing economic experiment.

That
consensus may not be wrong. The history of the North American Free Trade
Agreement as an institution has been one of piecemeal, often reluctant,
integration of three countries with a long tradition of protectionism
and fierce defense of economic national sovereignty. While NAFTA was a
boon for certain sectors of the economy, particularly the U.S.
agriculture industry, the net effect of the world's second-largest trade
bloc remains somewhat unknown.

The
debate over NAFTA can, however, obscure some fundamental realities about
the future of North America and its three major countries. While the
formation of the trading bloc represented a remarkable political
achievement, NAFTA has remained a facilitating institution whose success
has mirrored the ebb and flow in the slow but inevitable economic
integration of the United States, Mexico and Canada. What lies ahead for
the three countries will not so much be the result of NAFTA as NAFTA
will be the result of the strong geopolitical imperative binding the
three together. Washington, Mexico City and Ottawa are tied into major
global and regional trends that Stratfor has been following over the
years, trends that continue to point to a comparatively bright future
for the North American triad.

Core North America

North
America proper extends from the Arctic reaches of Canada to the Darien
Gap, a thin, swampy strip of land linking Panama with South America. But
given the idiosyncratic and fundamentally different geopolitical
realities of the Central American isthmus -- encompassing Belize, Costa
Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama -- a
simpler and more appropriate definition of North America would be the
continental landmass from the Arctic to the southern Yucatan Peninsula
in Mexico.

There is
little question that North America, by this definition, has been blessed
by geography. There are only three countries in an area more than twice
the size of Europe. Each of them enjoys a coastline on both of the
globe's major oceans, providing critical buffers and serving as
jumping-off points for domestic and international trade. Natural
resources are abundant, as are overall arable lands, all facilitated by
naturally integrated river transport networks at the heart of the
continent.

The overwhelming beneficiary of these geographic advantages has, of course, been the United States,
but its meteoric rise as a global hegemon was also in great part due to
the fact that neither of its neighbors has posed a threat. The wealth
of the United States, combined with the physical barriers of the three
northern Mexican deserts and to a lesser degree the Great Lakes, ensured
that America's military power could preserve the borders dividing the
three countries -- yet those boundaries are not so insurmountable as to
hinder trade. The definition of those borders with Canada and Mexico
during the 19th century allowed Washington to concentrate on dominating
the world's oceans, eventually giving it control over most of the
world's trade and the ability to deploy its power to any corner of the
globe.

Canada
was not always a friendly neighbor. During the War of 1812, Canada was
the launching pad for a British military campaign that resulted in,
among other things, the burning of the White House. This stance changed
definitively in the aftermath of World War II, when the British Empire
-- Canada's previous patron -- began its decline in earnest and Ottawa
had to become more integrated with and dependent on the booming U.S.
economy. By the time the United States and Canada signed a bilateral
free trade agreement in 1988, the two countries had been each other's
largest trade partners for decades. Today, China is Canada's
second-largest export destination, and yet China takes just 6 percent of
the goods that the United States does.

Mexico's
role and history in North America are a bit more complex. The country
controlled the largest territory and had been the dominant economic and
military power on the continent for centuries under the aegis of the
Spanish Empire. But the Mexican War of Independence fragmented the
already-weakening country and shifted the balance of power in favor of
the United States. With the United States having received Florida from
Spain earlier in the 19th century, the Texas War of
Independence and the Mexican-American War allowed Washington to gain the
vast swath of land between Louisiana and the Pacific Ocean -- including
the strategic ports of California and the approach to the Mississippi
River. With the border settled (figuratively and literally), the two
countries finally began economic cooperation in earnest.

With its
large pool of cheap labor and its geographic proximity to the United
States, Mexico became a vital economic variable for Washington. Setbacks
did occur over time, in particular Mexico's expropriation and
nationalization of its oil industry in 1938 and the immigrant
repatriation crisis of the 1930s. But geography and the economic complementarity
between the world's largest consumer market and its neighboring low-end
manufacturing economy continued to make the relationship inevitable.
Today, Mexico exports about $1 billion worth of goods per day to the
United States, making it the United States' single-largest source of
imports and its third-largest trading partner. Issues do remain,
particularly over the question of immigration, legal or otherwise, with
both countries trying to find a balance between competitive growth and
stable domestic employment.

Key Geopolitical Trends

The three
North American countries find themselves at the epicenter of key
geopolitical trends, which outline a relatively bright future for the
group. Many of these trends have been playing out for decades, while
others have been set in motion only in the past few years.

Stratfor has identified three major pillars that defined the global system following the Cold War.
The first was the integration of Europe into the massive supranational
entity known as the European Union. The second was the emergence of
China as the center of global industrial growth. And the third was the
uncontested U.S. position as the world's only superpower.

Since
2008, two of these pillars have become increasingly fragile. The
European Union continues to be mired in an existential economic,
political and social crisis. It is unable to harmonize the divergent
interests within itself, yet it also is unwilling to pay the price of
rupture. The European Union has in fact become a cautionary tale for the
proponents of a beefed up, more organized version of NAFTA.

Meanwhile,
China has all but accepted that the time of double-digit growth rates
based on cheap labor is gone. Beijing is now focusing on the delicate
task of transitioning a 1.3 billion-strong nation with staggering
economic disparities to a more sustainable model.

The
United States, battered by the 2008 crisis, continues to recover
economically and remains the strongest of the three pillars. It also
remains the world's overwhelmingly dominant military power. But
Washington has also begun adopting a more nuanced (and cost-effective)
foreign policy that shies away from direct entanglement in favor of
creating balances of power to stabilize strategic regions of the world,
particularly the Middle East, which has consumed U.S. attention for much
of the past decade. It remains a near certainty that the United States
will continue to dominate the global system for the foreseeable future, a
position that will benefit its two neighbors as they continue to be
tightly integrated with the American economy.

But while
the United States' continued global pre-eminence is a key provider of
stability for North America, one must look south for the continent's
source of dynamism in the decades ahead.

Mexico's Bright Future

Mexico's
demographic profile is among the world's most promising. Its labor pool
has been expected to grow by 58 percent between 2000 and 2030 while
China's is slated to decrease by 3 percent over the same period.

From
aerospace engineering in Queretaro to footwear assembly in Guanajuato,
Mexico is shaping up to be a competitive and flexible manufacturer.
Mexico's geographic proximity to the United States and high levels of
internal wage and skill disparity made its manufacturing sector more
competitive than China's after 2012. Yet Mexico also seems to have found
a way to avoid the Chinese curse of depending on low-cost
manufacturing. High-tech exports accounted for 17 percent of Mexican
gross domestic product in 2012, while cars amounted to a quarter of all
Mexican exports that same year. The high tariffs on high-tech products
manufactured outside of NAFTA give Mexico a notable advantage.
Particularly noteworthy is Mexico's booming aerospace industry. This
sector has received the most foreign direct investment in the global
industry for the past four years thanks in great part to the
construction of a massive manufacturing plant by the Canadian company
Bombardier in the central highlands of Mexico.

Challenges
do remain for Mexico. Income disparity is a double-edged sword, and
while the middle class grows at a slow pace, the country's poor
education system continues to create a shortage of skilled labor for
high value-added manufacturers considering a shift to Mexico. Organized
crime continues to be a high-visibility issue that slows foreign
investment, even as the current Mexican administration seems to have
toned down some of its predecessor's more aggressive policies.

Still,
progress seems to be on the horizon. In a rare display of political
unity, the Mexican government passed a host of constitutional reforms in
2013 that may begin to address some of the country's systemic issues,
particularly those in the education, fiscal and energy sectors.

The
importance of the last one cannot be overstated: Since the
nationalization of oil in 1938, Mexico has been blighted by a steadily
ossifying energy sector. The Mexican Constitution made it nearly
impossible for foreign companies to participate in any part of the
country's energy supply chain, leading to technological stagnation and
decreasing production and efficiency levels. The constitutional reforms
passed in late 2013 are one of the first concrete signs that Mexico may
be on the eve of a much-needed revitalization of its hydrocarbon sector
-- boosting the country's competitiveness in the global arena. U.S.
companies are likely to be deeply involved in this process, especially
since they command the best technical expertise for the deep-water
offshore and unconventional onshore production that Mexico will need
most -- yet again reinforcing formal and informal ties between the two
countries.

Meanwhile,
though Mexico's energy revolution may still be some time away, energy
revolutions are in full swing in its two northern neighbors. Canada is
the sixth-largest global oil producer after its decadelong process of
unlocking its unconventional oil sands deposits. Close to two-thirds of
Canada's oil production is exported via pipeline to the United States,
making it by far the largest supplier of crude to the United States. As
for the United States, the story of the shale revolution is well known.
Advanced extractive techniques have revitalized mature fields and opened
up unconventional plays at an astounding rate over the past five years.
While revitalized oil production has served to shore up some U.S.
energy trade balances, the greatest boon has been the tapping of immense
natural gas reserves that have driven down domestic prices of the
commodity (a helpful tailwind for the recovering economy) and put the
United States on the path to becoming a global exporter of liquefied
natural gas.

There
are, however, limits to the benefits of such an energy boom. True energy
independence, even on a North American scale, is unlikely to take place
anytime soon. The Unites States will continue to depend on a reduced
but still significant volume of oil imports from potentially volatile
regions, particularly if Canada begins to export additional oil to the
more lucrative Asian markets. In addition, any potential overseas
hydrocarbon exports by either the United States or Canada would tie the
two countries deeper into the global commodity market. The true benefits
to the United States and Canada will be, as they have been so far,
economic rather than geopolitical. Trade balances are likely to improve,
yet again boosting the interlinked economies of the three North
American nations.

Twenty
years after its formation, NAFTA remains a useful, if incomplete,
expression of the economic ties between these three countries. It has
not been, and will not be, on par with the establishment of NATO and the
1803 Louisiana Purchase as one of the fulcrums of U.S. history, despite
Al Gore's hyperbolic claim in 1993.

The true
bonds between the three countries are their aligned and complementary
interests born of their shared geopolitical fate. Though the future of
the United States, Mexico and Canada is by no means set in stone, there
are strong indicators that the triad has what it takes to be both a
stable and dynamic geopolitical grouping in the long term -- something
that currently seems out of reach anywhere else in the world.

Editor's Note: Writing in George Friedman's stead this week is Marc Lanthemann, a geopolitical analyst at Stratfor.

Original Link: http://www.stratfor.com/weekly/nafta-and-future-canada-mexico-and-united-states